Leading the Transition Locally

The report argues that subnational governments are critical to the global energy transition because extraction facilities and workforces are located within their territories. It presents a toolkit of financial, regulatory, and enabling tools to help these governments phase out production, reduce environmental impacts, and diversify local economies. The authors categorize subnational regions into four types based on their production status and reserves, noting that early movers can reduce transition risks and attract low-carbon investment. Key recommendations include developing time-bound, sequenced, and financed roadmaps and avoiding diversification into carbon-intensive downstream activities like refining or petrochemicals.

• Subnational governments hold significant influence over global fossil fuel production; in 2024, approximately 73% of oil, 71% of gas, and 100% of coal were produced within these territories.
• The report identifies three primary policy objectives for subnational governments: proactively managing the transition away from production, reducing the environmental impacts of existing operations, and diversifying the local economy to ensure equity and justice.
• Subnational governments can employ various 'direct tools' to curb production, including bans on drilling, fracking moratoria, and ending new exploration licensing. Examples include Quebec's prohibition of all oil and gas exploration and New South Wales' ban on offshore petroleum drilling.
• Financial tools for managing the transition include resource production taxes, the removal of production subsidies, and the creation of decommissioning funds. For example, British Columbia eliminated its Deep Well Royalty Program in 2022, which had provided USD 1.1 billion in subsidies that year.
• To reduce environmental impacts, subnational governments can implement industrial carbon pricing, methane regulations, and clean energy mandates. Quebec and California have linked their cap-and-trade systems to create a large North American carbon market.
• Economic diversification efforts should prioritize low-carbon sectors rather than downstream fossil fuel activities like refining or petrochemicals, which risk locking regions into carbon-intensive trajectories.
• Just transition tools include the establishment of dedicated funds, such as Scotland's GBP 500 million Just Transition Fund, and the creation of advisory bodies like the Just Transition Commission.
• The report recommends that subnational roadmaps for transitioning away from fossil fuels be time-bound, sequenced, financed, intersectional, and developed using 'whole-of-government' and 'whole-of-society' approaches.
• Subnational regions are categorized into four types: those with no production and no significant reserves, those with no production but significant reserves, those with production in structural decline, and those with stable or increasing production.

APA

Jones, N., Parra, P. Y., Walker, T., & Kelly, J. (2026). Leading the Transition Locally. International Institute for Sustainable Development. https://www.iisd.org/system/files/2026-04/fossil-fuel-production-subnational-states.pdf

Chicago

Jones, Natalie, Paola Yanguas Parra, Toby Walker, and Jessica Kelly. Leading the Transition Locally. International Institute for Sustainable Development, 2026. https://www.iisd.org/system/files/2026-04/fossil-fuel-production-subnational-states.pdf.

Wikipedia

{{cite report |last1=Jones |first1=Natalie |last2=Parra |first2=Paola Yanguas |last3=Walker |first3=Toby |last4=Kelly |first4=Jessica |title=Leading the Transition Locally |publisher=International Institute for Sustainable Development |date=April 2026 |url=https://www.iisd.org/system/files/2026-04/fossil-fuel-production-subnational-states.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jones2026leading, author = {Jones, Natalie and Parra, Paola Yanguas and Walker, Toby and Kelly, Jessica}, title = {{Leading the Transition Locally}}, institution = {International Institute for Sustainable Development}, year = {2026}, month = apr, url = {https://www.iisd.org/system/files/2026-04/fossil-fuel-production-subnational-states.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }